PepsiCo unveiled a $3.3 billion sale of its Tropicana and other juice brands in North America to French private equity firm PAI Partners on Tuesday, as it looks to simplify its product range and move away from high-sugar drinks.
The company, which bought the orange juice maker in 1998 for roughly $3.3bn (£2.37bn) and US-based Naked Juice nearly a decade later for $150 million, will keep a 39 per cent stake in the new joint venture and have exclusive US distribution rights for the brands.
The sale will give PepsiCo the funds to develop and grow its portfolio of health-focused snacks and zero-calorie beverages, Chief Executive Officer Ramon Laguarta said, as the company focuses on more profitable brands.
PepsiCo planned to invest some of the proceeds in "healthier snacks, zero-calorie beverages, and products like SodaStream which are focused on being better for people and the planet," a statement said.
Terms of the deal included "an irrevocable option to sell certain (other) juice businesses in Europe" by early 2022, pending regulatory approval, it added.
PepsiCo purchased SodaStream in 2018 for $3.2bn and sees a bright future for the healthy food and drink market.
Rival Coca-Cola Co has also been streamlining its product range over the past year, discontinuing its TaB diet soda and Coca-Cola Energy brands in the US and selling its ZICO coconut water brand.
"Companies are finding it difficult to provide effective marketing support behind an infinite number of brands that often compete for very similar occasions," Rabobank Food and Beverage analyst Stephen Rannekleiv said in May.
He added that companies are looking to launch new products that have been developed in-house.
The juice businesses made about $3bn in net revenue in 2020 for PepsiCo, with operating profit margins that were below the group's.
In July, the US group raised its 2021 forecasts and now expects core sales to expand by six per cent.
Meanwhile, "this joint venture with PAI enables us to realise significant upfront value, whilst providing the focus and resources necessary to drive additional long-term growth for these beloved brands," Laguarta said in the statement.
PAI managing partner Frederic Stevenin added: "We believe there is great growth potential to be realised through investments in product innovation, expansion into adjacent categories, and enhanced scale in branded juice drinks and other chilled categories.
"We are also thrilled that PepsiCo will remain involved as our partner in the joint venture."
The deal is one of the many food and beverage investments PAI has made over the last few years. In 2019, Nestle SA sold its US ice cream business, including brands such as Häagen-Dazs, to a joint venture backed by PAI in deal valued at $4bn. Since the early 2000s, PAI has also built up a 50-percent stake in the yoghurt brand Yoplait.
